The foreign exchange markets are relatively quiet this morning with the Canadian dollar flat against the US dollar. The Loonie has had an interesting week. It hit a two year high early in the week on the vaccine news and US political stability. It has since given up those gains and then some and is now trading right in the middle of the range of where it has been since September. In Canada, the end of the Federal/Provincial unity we saw at the beginning of the pandemic is also an issue worth watching as it may hamper the country’s response to the second wave. There is a possibility that Canada’s Covid case numbers begin looking more like that of the US, in which case, you will begin to see the Canadian dollar soften in response. If that happens, it would be the first time in a long time where exchange rates react directly to daily domestic case numbers. International markets have thus far treated Canada as an outperformer against Covid, especially in comparison to our neighbors and have priced our currency with that view in mind. That perception is now at risk. Separately, Canadian inflation data for October will be released next week and will be an important indications of the shape of the economy and potential Bank of Canada responses.
